Property transactions often involve large amounts of money. Property here in the East Bay may be valued at millions of dollars. With so much money involved, real estate is a common target for fraud. Law enforcement and prosecutors take real estate fraud allegations seriously, with penalties including years in prison and severe fines.
Real Estate Fraud in California
There are many forms of real estate fraud in California. This includes defrauding home buyers, sellers, insurance companies, financial institutions, tenants, renters, and government lenders. Examples of real estate fraud may include:
- Foreclosure fraud
- Rent skimming
- Property deed forgery
- Mortgage fraud
- Loan application fraud
- Property insurance fraud
- Credit fraud
- Predatory lending
- Straw-Man Schemes
Foreclosure fraud has been on the rise since the last housing crisis. Foreclosure fraud can take many forms but it usually involves someone offering to help someone whose home has gone into foreclosure. This includes foreclosure consultants, mortgage rescue services, or loan modification companies.
Foreclosure notices are public records, and individuals may see a notice that a homeowner is in default with their bank. The individual may then contact the homeowner to offer a way to save their home.
These foreclosure consultants may charge high fees and require security in the property to help the homeowner. In the end, the foreclosure consultant may have performed no service at all or a worthless service of no real help to the homeowner.
Under California Civil Code § 2945.4, it is a violation for a foreclosure consultant to engage in a number of practices, including:
- Demand any compensation until after the foreclosure consultant has fully performed each and every service the foreclosure consultant contracted to perform or represented that he or she would perform;
- Claim any fee, interest, or any other compensation for any reason which exceeds 10 percent per annum of the amount of any loan which the foreclosure consultant may make to the owner;
- Take any wage assignment, any lien of any type on real or personal property, or other security to secure the payment of compensation;
- Acquire any interest in a residence in foreclosure from an owner with whom the foreclosure consultant has contracted; or
- Take any power of attorney from an owner for any purpose.
Rent skimming involves an owner who takes rent from tenants but fails to make mortgage payments on the property, causing the property to go into foreclosure.
Under California Civil Code § 891, it is also considered a rent skimming violation to collect money on a property that an individual does not own or has no authority collect rent money.
Property Deed Forgery
Property deed forgery involves altering a document or attempting to pass off a fake property document. This could include offering a property for sale based on a fraudulent deed or attempting to get a loan using the fraudulent deed as security.
In 2012, the California Bureau of Real Estate issued a consumer alert warning people about the rise in property deed forgery. Fraudulent or forged deeds were being recorded against properties in California without the knowledge or consent of the owners.
Mortgage fraud generally involves making false representations in a loan or property document to get a loan, or fraudulently inflate the size of the loan. This may include cases where the borrower overstates their income to get a bigger loan. A borrower may also falsely state their position, employer, or role in obtaining a loan to get a loan they may not otherwise be qualified for.
A borrower may fraudulently omit debt, loan obligations, or other mortgages to make it appear they have a lower debt-to-income ratio. Similarly, the borrower may falsely state they own other properties or have assets to provide security to a lender.
Real Estate Fraud Penalties
The penalties for real estate fraud depend on the type of fraud involved, the amount of fraud involved, the extent of fraudulent activity, and the defendant's criminal history. Real estate fraud can also involve multiple state criminal charges and federal criminal charges.
If real estate care fraud involves a small amount of money, valued at $950 or less, it may be charged as a misdemeanor, punishable by up to 6 months in jail and a fine of up to $1,000. However, most real estate fraud involves property worth much larger amounts of money and may lead to felony charges.
As a felony, real estate fraud includes penalties of up to 3 years in prison and a fine of up to $10,000. However, when the fraud involves more than $65,000, the defendant may face up to four (3 years plus one additional year) in prison. If the fraud involves more than $200,000, the defendant may face two additional years on top of the prison sentence. For real estate fraud involving more than $3.2 million, the defendant may face an additional four (4) years in prison.
In addition to criminal charges, real estate fraud may expose the defendant to civil penalties and civil liability from the real estate fraud victims.
Real Estate Fraud Defenses
Real estate can be a speculative business. Many legal and valid real estate deals can result in accusations of fraud when one party feels like they didn't get what they bargained for. However, the criminal charge of fraud generally requires an intent to defraud. If the defendant had no intent to defraud anyone, they may have a defense to fraud charges.
There are a number of possible defenses available to individuals facing real estate fraud charges. If the prosecutor does not have enough evidence to convict someone of a crime, they may try and get the defendant to agree to a plea deal in exchange for a lower sentence or lesser charge.
Before you agree to plead guilty to any criminal charges, you should consider talking to an experienced criminal defense attorney about your case.
Experienced Criminal Defense Attorney Representation
Lynn Gorelick has more than 30 years of criminal defense experience in the East Bay and understands the penalties involved with real estate fraud. She understands how to approach the individual facts of each case for the greatest chance of success, keeping her clients out of jail with a clean record. If you are facing a real estate fraud investigation anywhere in the East Bay, contact Lynn Gorelick today.